Day Two – Whoa!!! Slow Down There …

What we are talking about on this one is something called the Acceleration Clause or ‘Due on Sale’ clause.

This started in the 80’s wholeheartedly by the banks. Simply put it prevented someone from assuming the mortgage on a house when they purchased it. The banks used to be ok with it until they saw interest rates begin to increase in a big way. Remember 1980 or so when home interest rates got up to 18 or 19%. I remember and it was not pretty.

Banks did not want you to be able to assume the existing lower rate mortgage so they started adding something called an acceleration clause. It meant that when you sold the house they ‘accelerated’ the loan and made it due and payable at the sale so the buyer had to get new financing at the market rates. Win for the bank, loss for the buyer.

Remember the homework assignment from the last article? Who is Garn – Saint Germain? Well, it was an attempt to combat this practice by the banks under some circumstances. The point here is to make it more acceptable to allow a purchase of property ‘subject to’ the current mortgage.

All that means is it allows investors the possibility of purchasing investment property without getting a new loan and incurring the expenses involved in that. All the foreclosures and other distressed properties are a huge potential for investors to purchase, refinance and hold or rehab and sell at a profit. Profit is not a bad word in any context but particularly not bad as it motivates investors to do what we need to in order to get past this place we find ourselves in. This market is flush with distressed property and it is holding down the recovery in a big way. This could help move it out and then we get to move up in the market.

Stay tuned, there is more to come for Day Three. We’ll talk a little more about profit.

BTW, if you know any investors interested in the market please call me with their name and number. i have lots of experience and info to share with investors. It is possible to purchase subject to the mortgage or possibly some other creative ways of financing and purchasing.

Thanks for listening,
Jerry Robertson
678-231-1578 Cell

• ← Day one – a week to solve the economy problems
• We interrupt this series for an important announcement… →